Quarterly Business Magazine

Real Estate

Constructing an Urbanized Yangon: Expectations and Reality
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One might assume that properties in Myanmar, as one of Asia’s developing nations in the period of a make-over for a democratic transition, would settle for less. Of course then, one would be wrong.The cost of accommodation in metropolitan cities such as Yangon is expensive. In fact, it is even higher than some of the cities in Myanmar’s neighbouring countries. Residents believe a groundbreaking visit by the US Secretary of State Hillary Clinton at the end of last year, followed by that of US President Barack Obama earlier this year, tipped the property prices. Not only did the visits lead to a rapid rise in the country's popularity, but they also initiated the lifting of sanctions to support the reform process; which only means Myanmar's economy will take off and become accessible for serious business. If economic growth accelerates, much of the new activity is likely to be concentrated in urban areas, particularly in Yangon.

Yangon is not only geographically strategic to attract investors; the former capital is now also the largest commercial city of the country and the most populous, being home to over 4 million people; three times the population of Mandalay, the ancient capital of kings. The city represents about one fifth of the national economy. Tourism is likely to grow dramatically and Yangon is the logical gateway for visitors to the country. Myanmar has many attractions, such as the centuries old pagodas of Bagan, which make it the next authentic tourist destination. Yangon too, with its Shwedagon Pagoda is a must visit tourist attraction of the country. And since it is the country’s prime city, its airport offers the most convenient flights and connections for foreign visitors.

As Myanmar enters into a phase of rapid development, investors are eager to explore and invest in Yangon’s real estate and capture demand in various sectors to serve the market not yet congested. Despite the Myanmar government’s efforts to stabilize the value of estates by making amendments to the property tax laws, local residents and small business owners in downtown are facing difficulties paying for rent that has gone outrageously high, that it has become no longer affordable with their earnings. Major expansions of the urbanized areas are likely to be needed in the long term, as much of Yangon appears to be developed to a relatively low density, which suggests that there remain many opportunities for infill development. In the mean time, some residents have had no choice but to move further out of the city.

However, it is still business as usual for Yangon as demand is on the rise. Whether you are buying or selling, many real-estate agencies in Myanmar are eager to assist to make informed suggestions in selecting properties. Many of these agencies are now even reachable online for those who have set interest in entering Myanmar.

Local real-estate magnates such as Serge Pun of First Myanmar Investment and U Tayza of Htoo group of companies are competing aggressively to get a hold of properties in Yangon as the prospects of such acquisitions promise continued growth.

One of the major infrastructure developments in plain sight along the Kaba Aye Pagoda road is by Hoang Anh Gia lai Group (HAGL), a Vietnamese residential property development business, constructing its first phase of the development for the 8 hectare complex in Yangon, including a hotel, mall, offices and apartments with a total planned investment of US$ 300 million. The development was approved in December 2012 after extensive negotiations and, according to the Ministry of Hotels and Tourism, this project accounts for 26 percent of total foreign direct investment in this field and made HAGL the largest foreign investor in this sector.

Special economic zones are designed to attract foreign and domestic investors by providing relief from restrictive regulations or taxes to industries located within the zone. But the location of the zones and the supporting port facilities will shape the metropolitan area strategically. Following the creation of the Thilawa Special Economic Zone (SEZ) near Yangon’s Thilawa port, land adjacent to the areas have been selling for prices well above the previous market range - an overwhelmingly positive development for the sector as it sparked an immense interest and heavy investment from both local and overseas investors, resulting in a high demand and increase in property values. Out of the three SEZs, the Thilawa SEZ due for completion in 2015, has the greatest potential to develop and deliver gains within the next few years. This is mainly because of its proximity to Yangon, and much of the country’s legal imports and exports go through Thilawa Port, the largest and busiest port in Myanmar. Thilawa’s Special Economic Zone currently covers over 2,400 acres and has potential for expansion, most likely by condemning nearby underdeveloped industrial areas or by creating a new zone within reasonable driving distance of the existing port.

New areas for development are also being uncovered as an estimated 10% of Yangon's population continues living in slums. Such new areas for development can be an opportunity for construction projects to build low-cost residential developments or condominiums to serve the emerging middle class society. Star City in Thanlyin, located on 135 acres of land in southeast Yangon is a housing development project of 20 residential towers, complete with a golf course and a shopping complex. It is a new urban community created by Serge Pun & Associates with a goal to provide affordable and high quality residential units alongside commercial and retail facilities. The price range is from US$ 44,000 to US$ 80,000 depending on the location and dimension of the property.

Some officials and residents are concerned about whether it is desirable for Yangon to capture so much of the country’s economic growth as development must be encouraged in the rural and border areas of Myanmar as well. Inclusive economic growth is vital to political stability. Another concern lies in the pace of urbanization in Yangon. Although not many are concerned about the preservation of colonial era buildings in downtown Yangon, some do fear that Yangon may lose much of its current appeal as the garden city of the East and become just another polluted and congested urban megacity.

Yangon must be prepared in comprehensive use of land and infrastructure planning to facilitate rapid growth, set out where new development should be located and how it will be serviced. Given the time pressure for development, it is important that Yangon receive high quality international assistance in its planning effort.

 
 

 

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